BANR - Earnings call transcript Q1 2020

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Operator

Good day and welcome to the Banner Corporation's First Quarter 2020 Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mark Grescovich, President and Chief Executive Officer. Please go ahead, sir

Mark Grescovich

Thank you, Rocco, and good morning, everyone. to for to Banner like XXXX first also call earnings Corporation. would welcome the you quarter I

As is Conner, customary, Chief Head is Officer; Rick of joining Officer; Commercial me on our Financial Rich Credit the Credit Chief Investor Officer; Officer; Arnold, Rice, Relations. Peter Bill our and Financial Barton, Chief our call our today

harbor would please Rich, you read statement. our forward-looking safe

Rich Arnold

morning. Mark. Good Sure,

or forward-looking goals today measures Banner's general future or management's business statements. include Those other and discusses will of financial statements for presentation outlook or Our plans, and products and objectives for operations, of Banner's services, descriptions include outlook economic conditions. statements forecast about performance other

could statements actual today. also risk materially XX-K number XXXX. was to period available press the the the discussed earnings a question-and-answer factors on a Information discussion. filed actual results and that are from risks those are differ We forward-looking following ended uncertainties, results and may DecemberXX, in subject make the of year may yesterday differ recently and in that These other to release management's cause released forward-looking for statements Form

Forward-looking statements they no made its date to of are as assumes concerning Banner expectations. only update information the obligation and are effective

Mark Grescovich

we been cover Thank well and Today, your and four COVID as the you. an you, families primary with we it's will Rich. I And certainly pandemic. virus are quarter items interesting hope you all battle

on you comments high the provide will level I quarter. First,

support our team, clients, our our Second, shareholders. and I’ll Banner Banner our note stakeholders, our including doing things currently all that is communities to

to and loan current the status accommodations Third, our Rick Barton on clients. comments we made have our will portfolio assist provide of

the the our the estimated on performance for more build associated CECL loss credit and Conner our reserve consideration Peter quarter will provide of impact pandemic. into adopting with detail the of taking Finally, loan operating and

for right these X,XXX are assist difficult working important clients and of our extremely by clients, and our of during report we to capital It colleagues commerce all am events. cycles to provide and are source shareholders summed communities our to years. what colleagues, to core lived through is our values. core up for of entire has the continue our team my want our thing communities, the our I to doing I XXX living hard consistent am begin critically company reliable do values, in I all right thing the times. we thanking our Banner exactly who company and that a that and that economic our are doing. very proud as change Banner is pleased

Now to performance. of let turn quarter the me first overview an

compared net per $X.XX reported shareholders As quarter shareholders a This to announced, ended quarter diluted $X.XX of common profit XXXX. March Corporation to quarter XX, Banner $XX.X to of XXXX. share share profit XXXX a net in fourth common the $X.XX of of million first per the the per for share available or for and

the economy Peter instruments. adoption estimated detail CECL on value subsequently will increase discuss loan the in of earnings of and impacted quarter's loss by fair reserve including these number in of This of the a a our and net along more items, the items financial in the impact with the change pandemic were shortly.

on attention fair in XXXX, the This I for the acquisition to of Banner. the and and of $XX.X your believe an of quarter earnings power illustrate changes million financial measure, X%, were gains increase $XX.X earnings the of compared helps first XXXX million the quarter of of earnings expenses, Directing pretax, merger first and in core to impact the value securities excluding pre-provision instruments sale losses and

earning We benefited asset revenue to mix, million quarter fee and improved $XXX.X compared XXXX in mortgage above good margin of a million the banking $XXX.X first interest from X% revenue. core quarter our that XXXX. remained First larger operations and was from

community return core of in higher reflects provision resulted relationships, this this average funding adding on client continued Once loss assets strategy. super our bank promoting our growing our performance again, including X.XX% is, That model. growing deposits loan quarter quarter loyalty by for our Overall, execution and the position client on a service of the XXXX. new core responsive advocacy core through and first to

our ago with XXXX. our a point, XX% total performance of a the stable March XX% client we quarter. ratio bearing XX, of relationships. we coupled of from deposits Reflective one of uncertainty that organic Also To increased our future the our continued Non-interest to Further, economic the of increased new deposits. in year compared XX.X% X.X% equity have $X.XX and we of light deposits per the repurchases. strong strong generation share share core tangible issued suspended climate, common solid of dividend in represent

policy continue we our outlook, not of conditions our While to dividend. the monitor has core current changed and the supporting company economic

appointment our perform branches, workforce been others with nearly the operations remotely duties. working in for limited in meetings have our operational person we While by while XX% available has and effectively mobilized remainder

sure working remain are our We our and functioning. drive-throughs ATMs accessible and making

businesses increased for round These paid deferred ATM also daily first $XXX,XXX and up and have withdrawals. sickness. Provide our waived for totaling checks, for $XXX time-off nearly $XXX for XX. through loans on premium clients, has made for available our employees with programs distributions created mobile as waived and payroll payments Further, early have deemed essential on programs. interest X,XXX pay and totaling other provided deposits the limits assistance million provided penalties funds funding, April and benefits special up Banner we're of include providing support IRA exposure several SBA protection CD or withdraws and of million We $XX,XXX worksite we X,XXX additional to or to nearly

to Finally, we regional $XXX,XXX footprint. local basic contributions our provided and support of and have for nonprofits and in initial made significant emergency needs

discuss Rick? credit in to to call Let our Rick loan comments Banner’s his over and trends me now quality. portfolio turn on the

Rick Barton

Thanks Mark.

continued this moderate the of that our by the noting company's of quarter several during loan began call portfolio. the credit stated it that profile Those years, portion at For for further were with take. form risk statements metrics We metrics Banner's XX, might credit maintaining to be stable the next our the same credit just deal ended XXXX. well be March repeated to positioned could past the cycle, company whatever

and current However, March. making at the at the and to ignoring landscape now of With the akin speed morning in since on mirror has credit changing on position information this the and talk portfolio. that end looking mind, our the first that portfolio turn rear been to statement pandemic of observations is XXXX economic impact then a of thought work loan Banner’s this view about quarter my the of at the and remarks end will the of pandemic

million. linked driven portfolio to remain early The during The going Banner’s quarter It between nonperforming position of of point were single million due on million pandemic $XX classified impact. of and the assets. increase norms to The adversely modest are into context the our level loans this of million assets below loans of Nonperforming X.XX% are of financial the quarter, quarter $XX and pandemic is of an emphasize cycle. sense increase viewed makes assets and XX were the a having to but loans syndicated was split predate position. several credit company's company's total increased touch other and of basis capital $X during historic nonperforming the difficulties in the assets when in is leverage that pandemic. well to REO Nonperforming indicator from X.XX% were total up strength of metrics Delinquent end credit quarter credit at loans. $X assets that

You'll fourth recall of a single quarter last spiked of loan. a as in agribusiness nonperforming the result loans year,

of on quarter, of made $X.X this progress pandemic, of quarter the losses CECL Coverage agreed for is plan. total assets loans off loans $XXX.X million. group This With by provision at million The workout During $XX.X performing good Banner’s significant nonperforming after on loans. first was at million recoveries loan and the and of onset $X million. charge provision the was first charged special to was of X.XX% exposure, allowance is XXX%. and the loss which stands an our now on credit remained offs adoption

unfunded the $XX.X Conner loan remarks, thinking in commitments assumptions light will and posting under for of the was pandemic. Peter million. detail this reserve in provision In his our Additionally, CECL, quarter first

in X% XX the is XX.X% moderate priority this XXXX Residential are a For years, the loan past loans has are remix are profile. Multifamily risk the has of over and made of construction loans at land business of Acquisition, you its been our not loans Commercial XX, occupied remixing. been of XX% this pre-great loans. concentration of support estate support construction portfolio, in the X.X% loans. total to XX.X% real points of remember, March are company many loan following believe XX.X% and including of accomplished with was that development exposure portfolio. We loans recession. and as will owner total of loan the loans alone total portfolio

X.X% loan diversified loans permanent loans size X% is size portfolio. portfolio loans the are making by portfolio of estate four geography. the by credits and one are and the concentration. size it the total leverage industry, are also including loans are of than commercial real commercial XX.X% national Agricultural business less of portfolio's of of transactions less XX.X% with Consumer X%. diversified just largest than with an loans total geography the family portfolio. industry, Our average Investor Shared loan are loans being This to $XXX,XXX. first

The capital. XX% Outstandings capital is single XX% exposure are diversified. Finally, top the is of commitments X.XX% company's commitments on XX exposure of of borrower capital. these largest and is

relax on laser and deal of our credit has has initial effort good the and lines focused company's and support been credit risk been selection This of A focus between been from effort maintained with risk top co-operative a of great house the on deal management position has the puts of the Directors. in lending It in A Board continuing the our business to with the culture. production building we forward. unchanged as a remained policy clients approach us chose to pandemic. meet we realities stand should status our long underwriting economic going not of of the during needs This credit good to expansion. has of also us the

are the realities. Banner's balance will are of our as the expense. beginning The cycle we to quarters of my future portfolio be XXXX Peter the With capture provisioning this position quarter's of XX, complete, likely discuss, is portfolio in the initial March impacted. magnitude facing. also economic will on pandemic in forecasts is of discussion on the be the Economic cycle reflected provision to And impact remarks

of many granted. The been the our impact as level swift loan we in deferrals of reflected have modifications has clients and on and

month the release, to quarter during were and stand press These million. have million, loans of first $XXX and our in now modifications April loan is to X,XXX portfolio. totaling noted continued total the $XXX X.X% made As at loans XXX which numbers grow of

segments $XXX commercial and $XX $XX property estate, are balance million; hotel spread small million; four centers, $XXX with clubs million. motel real loans, between C&I consumer estate family modifications restaurants, loans, retail, $XX investor activity business including borrowers Portfolio fitness million; owner-occupied following: the at significant a the are and mortgages, one million scored of loans, million; The variety larger to real and $XX modification types. and sports of and commercial $XX million;

tenor regulatory guidance, to considered days restructures. been not under troubled has be The modifications are debt of and our XX they

practitioners, is leisure, million; Our $XX following: million; $XX exposure basis is and on hotel, million; restaurants, less $XX highest the are million; million; of million. gas the exposures with with segments facilities, less exposure care and million; immediate $XXX portfolio $XXX indirect our health nil and health exposure than care than direct a $XXX oil risk airline recreation $XXX in

to In process give order issues, our good are gauge review loan problem to a better in of help individually credits relationship our portfolio. we pandemic. through generally loan us This and portfolio the duration baseline relationship manage the the a by portfolio of on will

assist We businesses. how pandemic clients manner their the a safe deal they are committed in impacting as with is to and sound

this in we are we to just discussed, cycle. modifications the we unprecedented protection for our in participation credit program, can payroll actions survive the initiative. are our lending assessing And addition take upcoming and outlined help our Main Street to In other Mark participation looking the clients that

are portfolio pre And are research when outperforming us capital serve combined work to period credit These universities. our demographics, to operate economy and geographies we're footprint and this home and uncertainty. in of structure, as with national fortunate exceptional finally, well many we our economic that loan that strong metrics, with clients companies the through pandemic we will diversification

to comments. the Peter? Peter With that, I over Conner microphone for turn his will

Peter Conner

good morning, and Rick, everybody. Thank you,

As per income first million, prior or million, share share, net for discussed earnings $XX.X release, quarter compared per $X.XX as diluted previously and announced diluted in $X.XX $XX.X to the we our the reported or quarter. in of

from quarter deteriorating the provision conditions loan quarter, core impacted While CECL $X.X periods. revenue elevated negatively first fourth the million increased economic earnings that by and loss were contemplates future

few adoption day X the or actual reserve of incorporates reserve reserves $XX.X quantitative the Great to X CECL about quarter our and of to loss comments allowance of the approach model in and The history and the including losses loss XX back XXXX uses first increased during million million experienced Recession. reserves, CECL years first quarter. for from the Total the for the our provision the component first loan historical quarter. of quarter commitments, make fourth day the a like I'd losses inaugural credit including unfunded to to $XXX for the

economic and has remaining peaking end, at The the to deteriorated. markets second judgments GDP XXXX. we when XX% reserve, in contemplated negative growth assumption X% XX% and economic quarter component the range the X% unemployment adjustment Our Since into then quarter, the conditions our outlook in established unique the forecast reflects X% range portfolio. and management qualitative to to in

existed However, government used to Banner yet risk is provided transfer of reopening facts the quarter prudent end, forward. in do pace fiscal known, reserving since by are economy. circumstances quarter that we continue has Great be the the of effect going the this on we first believe of nor the the we participating Recession, is programs will Banner that offsetting to at and and stimulus a continue and practice based timing methodology and so in the that loan

prepayments value. earnings per primarily prior quarter Turning carried the value in result provision and expense instruments loans financial lien end loss at to from a the the of one EPS. share with was lower on loan outstandings. of million in decline four in sale Total outstandings, increased loan reduction fair The quarter loan driven $X.XX $XX to held from in prior result decline first of increase the loans, along as construction a increased refinance mortgage for

of loan not end held sales the material overall million $XX held as declined of of We line as the experience the in usage portfolio portfolio by exceeded loans, quarter. $XX.X excluding million, for credit did any bulk the out for growth, first quarter. loans declined change for sale Organic sale multifamily production

acquisition, AltaPacific over X% held prior for the loans quarter. by the portfolio grew year Excluding

growth Ending as heading due balances quarter core increased $XXX increases and deposits account pandemic. million from into prior general average end liquidity increased to organic customer the new account in

as AltaPacific grew increased year deposits $XX growth. brokered CDS, remain of flat. in over borrowings quarter. million the $XXX core X.X% Excluding Time the an acquisition, CDs due FHLB retail increase prior declined core result deposits to million a by while deposit

quarter, earning decline points, quarter the basis overall and The Net curve. points, prior to yields basis loan interest by assets of prepayment yield with accretion-related an principally offset loan in to net average at declined interest totaling growth income basis coupon decrease XX in margin. due remained origination, offset was fourth X income which a an average deferred even million fees the small $XXX X basis decline interest in a penalty-related and in points. Compared in as decreased interest partially increase loan points X

the for Brokered of X the cost, points deposit prior lower in XX points basis than result of total due costs. the point to points funding XX declined costs. lower basis declines X costs of and deposits basis deposit wholesale quarter. to basis points quarter first of in cost funds CDs XX cost declined accounted to Total points X basis basis retail as deposit from a The

earning Composition of slower impact held quarter. the the decline the interest securities offset of ratio at asset with X.XX% to at point helped first X due with deposits in of total pace XX% core by steady securities securities, and MBS muni the on An kept deposits prepayment held steady of prices deposits non-interest-bearing of in speeds to decline in in March, total deposits at loan The distressed the XX% deposits declined yields. purchases to to modestly margin in improvement to total net basis costs funding as decline yields the yield. in along

the loan the quarter, through and second Loan rates the points to in points points seeing accretion we a X X accretion quarter. XX quarter continued during contributed from into adjust anticipate first and contributed in The basis April, the cost the to margin average into in bank continued basis decline basis margin carry up quarter. down the to deposit deposit the fourth

this Non-interest from of sales value prior spreads. investment loss at declined volume income fair on changes $XXX,XXX trading in results The Deposit in for AltaPacific on credit of fair included value, million higher mid-fourth quarter. adjustments carried to from the securities due $X.X portfolio and increased the non-interest additional securities increased million. the on excluding in income, Total quarter. held a $X.X million quarter losses $X.X acquisition to the fees due by

$X.X due the in production. sales Total SBA remain muted decline loan and hedge mortgage fee softened significantly demand the sale has held market income. buyer production principally multifamily fourth gain market income on income lower line to on due the high refinance slowdown and new item, near losses in residential due banking secondary quarter loan rate due to In $XXX,XXX with income $XXX,XXX for term, million the decreased on to an gain to as down Miscellaneous multifamily loan volume from demand. interest rates pandemic. swap increased on the the by Within in will was increase mortgage spreads primarily sale this

from million $X.X by the increased expense non-interest Total expense. prior non-interest to Turning quarter.

payroll $X.X of year, along increased quarter. $X.X due million the time operating with normally non-interest an experienced in and a this release costs higher pandemic medical specific expense in million. quarter acquisition expense higher increased fourth combination of claims expense to core taxes costs, accrual first the following Compensation Excluding

COVID-XX for declined claims The loan related orders. of quarter, an stay-at-home increase costs in by the medical first due first production. not the decline While specific in credit in a we did in in did advance substantial quarter million experience origination see new loan routine medical capitalized we to $X claims the

credit the increase X for increase $X.X as increased commitments change applied generally model for client as the Other employee of footprint. quarter day of first in activity, result the to by for expenses declined conference commitments. million as proportionate homeowners expense the losses and the Provision previously. all allowance unfunded loan facility state a This undrawn travel in result reserve a CECL across to required reserve driven loan the discussed in Banner's in effect lower the was transaction costs, and

operational systems achieve The when integration acquisition the remain were in facilities closures completed contemplated was and track expense on February, synergies we the AltaPacific conversion, announced. pro to in and forma successfully the

improvement efficiency returns platform delivery company footing. initiatives resumed have a this the will suspended been period be ongoing once Our to during operational and normal

reduction conferences over specific typically than and and the marketing would pandemic anticipate the transaction these branch for are items supplies rooms, offsetting medical less normal costs as sanitization, costs specific tracking cash such facility operating specific incurred We benefits certain courier premiums, increase salary in COVID-XX we and costs from period same employee and operating costs. and customer communications, environment. claims, remote driven enabling a We travel, including overtime, pandemic the be work will costs, IT have

my prepared This remarks. concludes Mark?

Mark Grescovich

Rocco, prepared Peter your your we And will the open now and comments. remarks. and welcome concludes you, call our Thank That questions. Rick, for

Operator

question Instructions] Bohlen Please go comes KBW. Jackie first Today's with ahead. [Operator from

Jackie Bohlen

first, you impact that multifamily just quarter-on-quarter. value into fee to I its a to contribution to Peter, everyone. quarter? the have the basis. banking helpful given linked-quarter mortgage dollar Can on morning, income Good increase was of dig this meaningful the wanted know

Peter Conner

about for Jackie, the it's it was Peter. Yes, $XXX,XXX quarter.

it's So bit has it than been. lower a

put production remarks, prior selling was decline I began than And of the as the hedge described loans. well, normally first and to we also in was the due that the that to pandemic was it As negatively most that affected emerge, in lower the to two to production multifamily. the experienced, on my pipeline then part pieces. in due It – we then prepared the to for quarter due two, quarter in

Jackie Bohlen

Okay. continue production trends those And likely near it that it? the to for sounds in in term specific of are piece like that

Peter Conner

secondary and Yes, slowdown that's in buyer in other buyer We pulled of pricing banks. of a of universe production the in universe correct. on increased back anticipation demand our

preemptively So forward. down going production slowed we've

Jackie Bohlen

in single-family I'm quarter? bit turning was That’s little to there off gain on looks almost that basic of helpful. single-family Was I'm But going higher be to doing as Thank in so like you. quarter it then due well the sale gains. piece it, just the And some of this piece terms head all here. margin? to math, the doubled Or volume a

Peter Conner

a a We of increase the above side. we It we've a we volume for the down continued refinance and high and well pricing sale sale The production, gain higher in quarter, and a bit able net a of fourth of experienced were It is basis was refinance gain purchase experienced. normally the The increase X% generate the what quarter. quarter, such terms on on demand over over mix first this XX% margin. refinance refinance that due on to little terms to from purchase towards were to quarter. actually XX-XX in in about was

was that by of all increase So on driven higher sale. gain

Jackie Bohlen

what you have do fourth was quarter? the And it Okay. for

Peter Conner

was I'm – The the what question? sorry,

Jackie Bohlen

– the The the was can fourth I quarter, two. just for gain what sale so the on compare

Peter Conner

of running sale percentage. on gain the mid-X% terms was It Yes. range in in

Jackie Bohlen

the are purchases is down know Okay. the But given line of And continue likely owners, I I suspect that current item home how looking to significantly. be volume state this to at quarter? you are in would refi strong.

Peter Conner

least that, is that holding well. up evidence the part in first so of at We're quarter, seeing are – pipelines this the far, the

in on things quarter haven't demand on all equal. a anticipate we're so far. coming would I yet, or of – in seen second diminishment lower so a quarter spread it's loans, somewhat volume spread Although the we'll sales see the not we gain through us

gain continue you QX. see to income third as anticipated And we then number see some to and seasonal second sale I volume. the quarter. in strong decline know, we due weather refinance But increase So in normally and a

of to that's volume. an normally the in slowdown what in offset terms a bit we'd see of So refinance

for gain So she on terms as steady right of think goes at the now quarter I sale. second we in albeit lower see a production

Jackie Bohlen

Okay.

line single probably family XQ? a XQ from somewhere probably that item, up perspective, winds So between and

Peter Conner

Yes, that's fair.

Jackie Bohlen

And Okay. I'll one step then just last back. one and

conversion savings the February. AltaPacific much you done mentioned realized cost to You was in date? How the from of have

Peter Conner

Yes.

have through, by So would end recognized of the XXX% them we of the first quarter.

So Any effectively the minimis done we really are point. are really with this costs. at remaining de costs

what full second is of in July see contemplated So quarter we XXXX. synergies transaction XX the we'd back the in of the a we amount announced when that

Jackie Bohlen

Great. back. Thank you. I'll step

Operator

from comes today question Please go of McGuire next Stephens, ahead. Inc. Our Gordon

Gordon McGuire

morning. line? about how for year net expense how capitalized I would in salaries could origination thinking origination provide activity. the that expectations you're And this I Mark, guess, costs you guess, activity updated Peter, translate the growth and Good into origination

Mark Grescovich

first Mark. Yes. of the is Gordon, take I'll that this part question.

thoughts would that I book. our mid-single-digit think had we initiated some loan see we some the in growth

to anticipating rebound, refinancing additional the low one we're continued environment that think economy their as And four begins in draw of start suspect to that going certainly but not until family now it the year. to the half at is as specifically facilities you're And some in of businesses is working looking lead the to occur not suggesting spending books. the and the we interest to see down year. capital going some later we're I to it's, to until capital rate latter will going

our as So can think look comment being do on the… – I at you loan the you flat. growth overall view want Peter, to

Peter Conner

it’s Peter. Yes. Gordon, Hi,

this fairly in think compensation as expense, into low production we'll naturally – expecting that we loan In typically terms origination business quarter, on some deferred lower We our production and expense going first highlighted, But see loan Mark based given QX to year model. a QX. pandemic. the seasonal pace we're modest in the just the of of credit a increase I have

because into pandemic. balance we of second be you've in what So as to that loan see got normally the quarter muted production increase kind will an in of

you’ve will production that normally increase, balance be item modest a I’d quarter guide So increase muted of we into loan of kind going that into and But because the in got QX. what an pandemic. see to the second to line in

The other PPP to That, quantity in wildcard has loan the offset. second on program, SBA the determined of doing some yet we that’s right? based end too, be origination But is amount up the quarter. modest yes,

Gordon McGuire

appreciate that. I

Speaking of – the of blended the an estimated could program, PPP do rate you P have what be? estimate

Peter Conner

Yes, Peter. this is

larger loans forward, the in based some was weighted loan So that go first expect of ways up. And at loan production. of in front-loaded but that tranche on we were we’ve average we size that go and average of as round processing will the decline the in the will fee announced we terms – today, production, first of had right fee weighting what higher X%, that a

we’re to ends. by the quarter closer the opposed X.X% second So I to to time be going X% think as

Gordon McGuire

Okay. the that pipeline then you for what’s the round And And in is how did just pipeline have loans pending many How approval? two? looking?

Mark Grescovich

Gordon. Yes,

those $XXX that applications in bank So million receiving the to of businesses X,XXX larger anticipate into numbers through SBA. as we inquiries deck funding. obviously what I the X,XXX by which the coming the initial by etran a numbers would and program. waiting saw we you approved that put in the approval overall are bit the did And phase, had terms in was we north of

of process approval you SBA the or the could as terms see loan very earning are that can the them. again, particular the provided numbers through and go there’s similar we And that in process, without up I this etran provided bank, system and for running you effectively they looking can So the number gave program. asset get growth growth enough funds

So that? this inflate to sheet. net obviously will Peter, you the remarks program, have which any balance additional of do

Peter Conner

think more. you covered No, I it lot

Gordon McGuire

And last funded Are these? to you the How how Thanks deposits sheet to PPLF these or expect balances? do point. FHLB? clarifying expect balance fund that to for is for bringing you use supposed Or be you in?

Mark Grescovich

do Peter, you want this?

Peter Conner

Gordon, XX points, capital – get is we’re with as from that the is also we’re you in Thanks, which, to regulatory Mark. going yes. lending the any well. as PPP relief know, but Fed, Yes, order to basis facility fund them Yes, required

our juncture this balance is that the loan with of plan So Fed at the to entirety fund facility. PPP

Gordon McGuire

Thank step back. I’ll Okay. you.

Operator

today David James. comes Please ahead. Our next go from Raymond Feaster with question

David Feaster

morning, good Hey, everybody.

Mark Grescovich

David. morning, Good

David Feaster

focused more supporting I up are the on just you an to just customers wanted even Are ask your PPP follow full using this client base? opportunity relationships? to existing for question. kind deposit expand of able to as And you’re you as or primarily relationship on

Mark Grescovich

This we’re is the utilization plan. bank. trying a we’ve true looking Mark. particular for through bank and the program for is that and as the that support the stage program, are clients, to of the Yes. doing the right don’t marketing to taken. who and a relief in are plan and with think approaches of support now, are some that’s all an of Many the I everybody obviously, view quick in as given funding it’s which its clients that the this application first PPP them one initial foremost Look, not approach them businesses I we’re trying

institutions our up up. the in financial which with how to other to we process as the help the businesses which trying are competing all This as operate, hope we this We these help for a is communities mobilizing businesses that’s strongly and set and banks. are doing other as operate. to it’s we marketing are staff in communities grab against not We set and the

going they to coming that is of the they them. if fill to they in one queue, folks – in out are this approach and our get an application qualify and service we’re So

David Feaster

deposits. about And helpful. and low-cost stimulus That’s how growth just and excess core everything, do forward? just actions environment, on done light tremendous market the then all flat guys guess job growing you in going you treasury I loan given And how liquidity? deposits, think do core the deposit maybe a a at do generally, you growth the done plan – have Okay. on where you using of

Peter Conner

ones those going an seeing seen accounts deposit liquidity are we in We’ve here. funded. account as program Peter David, PPP and get deposit inflows client increase and some well and Hi, from as the into accounts, level

It from back this that back – the think really we here for is going sheet the go to will proceeds it’s quarter going use there’s components. into liquidity more a one in So this two, two program off-balance component next There’s piece sticky. or go to in we proceeds increase And sheet. hang be funding then while, will of that’s off-balance increased a liquidity. around a PPP think bifurcated

going excess are creating the with risk invest liquidity take and advantage it, basically a an long short-term the we creating new liquidity company liquidity to not basis to of the lot over duration for of duration weighted this fan but on a excessive run. but So

investments of medium blend short, duration ultimately. where the both based a it’s deposits will go So believe and long of these on we

David Feaster

ultimately, about that all I how And under Just how forward you think then accretion of And guess, forward? thoughts going do think do also going light CECL? you core Okay. the in on NIM that? then about any

Peter Conner

had It loan a was also was – The so up quarter But – that X.XX% we points was Loan basis we anticipate was to margin accretion from lumpy. accretion good. couple Yes. quarter. decline we gradually a quarter. component of good quarter-to-quarter. the bit a our prior Accretion for the – of

not saw level first that of we’re in accretion quarter. the support see we So going to the

forward, Going go or every of drop we couple quarter will as points, think it one basis two forward. we a

look spot take loan yields our then we XX. did that the at rate you’ll on So March at And into account.

quarter, the So March we to the basis yields the X.XX%. a point We basis did average funds yield in at about in in cut which compared we on XX that – spot and after XXX loan loan decline rate XX. Fed the was prime reported point see

continuing So and a our costs. in in funding take into decline account you that factor then can

have purchased million partly there about significant week due distressed March our in a we to up third But yields. high-rated that mentioned deposit of very As and earlier, loan pace my prepared was $XXX case a in steady of munis the yields were when in that lower of decline wholesale with did in we also the along costs prepayment to rate reduction, securities mention steady prices the our quarter, due slower to I a continue dislocation partially offset a I activity MBS. at of this markets. funding corporates remarks, fact in to

on about of that so yield. basket came at And tax a X% securities adjusted

support forward. bit on going of that a create the little portfolio So will securities

And quarter, existence. pace on with the So all fee in the program that two quarters and in the accretive processing of loan provide on the PPP program We actually first to think of be specifically. going of effect being loan PPP. fundings don’t margin its said, the the will margin element PPP another this the margin it’s – is to we guidance on have

had a organic have expectations we that margin against And so into you declining yield loan that have would otherwise. factor to your generally

David Feaster

everybody. Thanks,

Operator

with comes Please question Andrew go next Piper Our ahead. Sandler. from Liesch

Andrew Liesch

Good everyone. morning,

floors, question know on a kind been for Just guys loan a have margin been of while. putting here. a you and that’s follow-up the focus I

loans of are tied now? what percentage fixed is at floors percentage the portfolio what of rates? right And Just to

Peter Conner

I’ll mix it’s Andrew, Peter. start question. with the

and between to loan way. over has fixed prime rest split our it the is it’s stable LIBOR. repriced and on of is have repricing basically About or remained mix be months Loans between So and the relatively of continues years three that XX% loan rate, time, our floating adjustable. and book five remaining XX%

spread price of today, the terms XX% at And of – that adjustable we’ve And and loans billion to as floating about with floor. about got is portion are actual its In that floor. or is strike of got its or $X.X its so of or book the still loan floor between at close floor. floors, either some remaining

as decline rule, rate a forward. So all yield originations as loan there’s we’ll some and go of new we approved. And unless there, the floors continue some we to discipline floating have floating but general they’re rate see in loan instilled exception support

point to is is loan will those other will credit time. expense origination spreads over floor pricing and there. indices market I that terms over a that the So natural that time, is effect. a make over to there improve expected there’s support market here the This some natural loan of And think accept in losses

Andrew Liesch

expenses pretty if rate merger the charges noninterest is that is come Got It this number is the of the expenses, helpful. on expenses the then $XX That’s called just around And agree. COVID-XX quarterly onetime like you. I out. here, or looked excluding million the some the some credit and you you see to quarter guess, and bit little a I a forward? be larger expenses a origination down looking – right going like at number the bit, little If run $XX million level so. of

Peter Conner

light Yes, as part in relatively David, the of that, origination you first out, credit – point to expense loan quarter of quarter. that’s it’s

up here earlier, is number to we that bit quarter. to in think As that the relative quarter – as the move going I mentioned goes second think a production I loan up first

the So get up AltaPacific you’ll showing benefit not benefit some big acquisition. It’s a synergy We’ll some beginning see second there. from in quarter. of the

see then component, there to going synergies not going will benefits conferences for I’m in guided begin aren’t that as forward. order, so happen would home stay to the other some our but say we because integration that some we’ll So of employee-related of quarter. earlier, travel the big full I a activity normally at costs it’s second and the And happening see

and pushed back automation to we’ve the improve commercial that improve I discussed retail the point platform delivery given ongoing delivery mentioned as will branch other our and our the previously, network some initiatives efficiency. been both have Those The that is platform, efficiency we in have pandemic. operating initiatives

active, So pace still during pushed pandemic. our deferred the operating out they efficiency during they’ve the so – pandemic, while the of been been improving they’re has

to that want take we account. So into

of end six months. XXXX pause for we’ll resurrect But the right now, those and about projects. beyond, they’re about think you XXXX on As and

Andrew Liesch

you. helpful. I’ll much. Thanks back. That’s step Got very

Peter Conner

Andrew. Thank you,

Operator

And Rulis our from D.A. Jeff comes Davidson. ahead. with question Please next go

Jeff Rulis

in questions you’ve in at-risk that guess PPP, have which morning. A you those have funded would in the group any for bunch But the do participated of PPP that I of identified, terms you that sense well? Good the of the been on Thanks. asked. percent as those included be

Mark Grescovich

to I’ll ask comment Rick on that.

Rick Barton

Good morning, Jeff.

identified done get segment money was that my that list can’t not round more spread funding view how a was it’s segments that until throughout we review analysis up say any funded we have concentrated as not off sectors, I we doing risk the pops on exception frequently. I quite the of have current list to word date so from in hotel yet. all the have a of used. high of with holding in the just the have comprehensive it’s little that we that possible one We the through that of the and

Jeff Rulis

Okay.

percentage of equal or you guess So be portfolio, hotel? X% your share, XX% higher was that think, if a of best the it would with

Rick Barton

Yes, would start Jeff. I where That’s from.

Jeff Rulis

Fair enough.

but the this, then, I know Okay. to answer it And I’ll Mark, anyway. ask think I

it. to thoughts kind we’re those that thoughts. got Just on know when general, when this triggers capital we’ve and sort of the buyback, of play in how be stay revisit or back on just the in But that I buyback capital, on and I may out. prudent in – appreciate – just plays

Mark Grescovich

Thank you, Jeff.

that over this. course too uncertainty I our suspended all any make other strong institutions we’ve this indicated to how supporting our to through want my clients still obviously we think capital the as to prepared going as of as next have. play just There’s remarks, in much that is share XX repurchase financial position and sure out we’re months, and the remains very

that’s one. So number

dividend a something $X.XX to for part through And for But institution core we all we is certainly the time. it’s deployment. support certainly, in to The clients other quarter, basis, our is of deployment our first of on dividend. our we identified all capital and as my a of and as policy. evaluate foremost, Board quarterly first issued that an of dividend capital at terms look the mind going And A institution, thing, remarks, in the as prepared obviously, the is top be this.

the opportunistic would as past the to the too comfortable in been is have that repurchase, in component and particular, and right And months. done be, we’ve of as the with next share is to we’ve good deploy feel be to what we understanding be profile as we going economic to going that country several when when to And is the we overall risk early risk just it’s tell. bank’s going now, appetite to over

Jeff Rulis

Or Is nonaccrual? credit. you that No. forward? here of agribusiness its given Or ultimate kind environment, that sounded TDR? well that to The on could that of classification do view it go the maybe one And credit the positive considered on kind of there. and progressing – that I appreciate possibly color processing we out one pretty going Rick. it’s be change last a as how regulatory for

Rick Barton

Okay. If restructure. remarkable least we reason whatever out debt with the happens. nonaccrual date. have just pleased to year first a baby at remarks, probably long-term troubled the something really be was workout. going today going a that made unless these moving probably to be But of consider Well, would in we be it progress as a I what’s of we’re nonaccrual my it are in could it’s said to for And steps before it out

a the get Sort point, happen of that into to and have very by vague hard we a the to, at such when them in these going very answer, a you’re date. tenor and this stages, in but situations really put and long early road say, such difficult workout markers to this it’s is

Jeff Rulis

forgetting was. Just what Understood. of was what Rick, the piece size that? the

Rick Barton

million. About $XX

Jeff Rulis

it. Got

Thank Okay. you.

Operator

And your any remarks. back this for [Operator to session. final the team concludes question-and-answer conference Instructions] management the I’d over to like turn

Mark Grescovich

Rocco. you, Grescovich. Mark is Thank This Great.

reporting do the of to today. we you continue the for to right as COVID our Thank everyone. in this again in Banner now. As thing as you Have we a team day, your forward Bye battle our and pandemic. the future. safe joining wonderful We and Banner I stated, for results interest we’re very to look proud call

Operator

you. concludes conference today’s This Thank call.

your have disconnect lines, may day. now You and a wonderful

Banner (BANR) 28 Apr 202020 Q1 Earnings call transcript